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New Features in AllocationADVISOR 6.0
An overview of all the new features included in the lastest release of AllocationADVISOR.
Black-Litterman: Asset allocations you can actually use!
Have you given up on mean-variance optimization because the resulting
asset allocations are unintuitive and anything but diversified? The
sophisticated Black-Litterman asset allocation model helps you realize the
benefits of mean-variance optimization by creating portfolios that you can
use.
How does the Black-Litterman Model Calculate Return Forecasts?
The Black-Litterman model uses two sophisticated mathematical techniques
to create forecasts for mean-variance optimization: reverse optimization
and Bayesian probability theory. This article is a "user-friendly"
explanation of these techniques.
Home Prices in StyleADVISOR
You can't pick up a newspaper today without reading about the boom in
single family home prices. Home owners will soon be able to hedge their
real estate exposure when the Chicago Mercantile Exchange begins trading
derivatives on home prices. Now you can analyze home prices in
StyleADVISOR with our new home price database
• Printable PDF version of this newsletter
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- This newsletter details the new features of StyleADVISOR 6.6, which include the Zephyr Style Drift Score, Manager Fact Sheets, apply parameters to an entire page, use qualitative data in manager searches, more formatting and date options, a periodic return table, a correlation matrix table, change the starting value in the Performance Graph, Year-to-Date statistics are now available in Manager versus Benchmark/Universe views, and Dynamic Text.
This edition also provides a preview of Zephyr Associates’ powerful new program CompositeADVISOR™, a complete composite creation, monitoring, management, and verification tool.
Other topics include a review of our vast number of databases, an introduction to our new Client Consulting Specialist, Mark Odo, CFA, and a schedule of upcoming training sessions.
- Sample Dynamic Text Workbook
- Sample New Features Workbook
- Sample Composite Advisor Report
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- Because of our superior methodology, investment professionals are using Zephyr Universes for peer group analysis. This newsletter discusses the Zephyr Universes in detail, including our new domestic fixed income universes, our methodology for the domestic equity universes, how to create your own universes and much more. Also, a further exploration into Monte Carlo simulation, Dr. Becker's Math Corner, information about online training and much more.
- Endowment Case workbook for AllocationADVISOR.
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- The newsletter’s feature article is a sample case using AllocationADVISOR version 5’s new Monte Carlo simulation. Additional content includes information on new databases, Online Training, Frequently Asked Questions, the 2003 StyleADVISOR Client Conference, and Dr. Thomas Becker’s Math Corner, where he explains how the mathematics of returns-based style analysis can be viewed as a curve-fitting problem.
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- StyleADVISOR 6.5 introduces additional statistics, a new ScanSearch feature, a
custom table, the ability to set global preferences and more. All the new
features are discussed here along with some interesting new workbooks using
long term financial data.
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- Our first newsletter sent out via email, which will be how all newsletters are presented going forward. Included in this newsletter is a comprehensive study of restructuring a 401(k) program, information about the all-new Salomon Global Sector indices, how to use PowerPresenter to create great looking presentations, and a few new workbooks for use in StyleADVISOR. Plus info on our annual Client Conference, information about our online training and of course Dr. Thomas Becker's Math Corner.
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- Included in this newsletter are the enhancements made to the latest version of StyleADVISOR including an explanation of the all new custom axis graph and we take a look at the new macro recording tool for changing parameters such as symbols throughout a workbook. Also included is an analysis of detecting a manager's sector changes using daily data and the all new Zephyr WebANALYTICS.
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- This newsletter features an analysis of using daily data in StyleADVISOR, specifically analyzing style drift and sector analysis.
Also an analysis of rolling sector alphas and information about all that is new in AllocationADVISOR 4.
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- This newsletter explains some of the new features of StyleADVISOR 6.0. Also, there is a new feature called "Math Corner" by Dr. Thomas Becker.
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- The collection and redistribution of indexes is a big part of StyleADVISOR. The first release of StyleADVISOR
had sixteen indexes. We have recently added 896 Morgan Stanley International Indexes and 333 economic indexes
from the St. Louis Federal Reserve, bringing the total number of indexes that Zephyr Associates, Inc. provides
and updates monthly to 3,399.
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- We have designed (I believe) the most sophisticated manager vs. universe comparisons. Our manager vs. universe graphs
provide much more information than the standard floating bar graphs. In this issue we look at the characteristics
that make for an effective manager universe, as well as the problems inherent in such peer group comparisons...
Also in this issue: Additions to version 5.2 and importing universes from outside StyleADVISOR.
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- We've had a number of requests from our users to add rolling R-squared and correlation graphs and tables to StyleADVISOR.
We've therefore added these and several other new items to StyleADVISOR 5.1. A discussion follows... Also in this issue: A look
at concentrated portfolios. Do managers have to take big bets to be successful?
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- One of the features of the new StyleADVISOR 5.0 is the ability to easily create a time series of a
manager's excess returns. There are a number of instances in which using a manager's excess returns might be better
than using the total returns. We will discuss a few in this newsletter... Also in this issue: New Indexes and
New Templates.
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- This month's newsletter discusses the feasibility (it is) and desirability (mostly not) of doing a more detailed analysis
of a manager's excess return using StyleADVISOR. This discussion naturally leads into a more general discussion
of manager benchmarking.
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- Market neutral investing seems to be gaining popularity. There are currently 19 market neutral products in the PSN database,
46 market neutral hedge funds in the HFR database, and a handful of new market neutral mutual funds. Market neutral
managers buy stocks they like and short stocks they dislike. If the shorts and longs have the same style and equal
dollar value (50% short, 50% long) then the portfolio should have little market exposure. The return comes purely
from the manager's stock picking skill (both long and short). How do you use StyleADVISOR
to analyze a market neutral portfolio? Simple... Also in this issue: Grafix Generator (more than automated updates),
Build Your Own Market Neutral Fund, Using Funds in AllocationADVISOR, and Website Additions.
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- In order to test the validity of exponentially weighted benchmarks, we performed a number of scans using various half life inputs.
We concluded that exponential weighting could indeed improve sensitivity to changes in style or asset class. The dilemma
is that the more sensitive you make an analysis (by reducing the half-life in the exponential weighting scheme), the
more noise you introduce into the analysis. The ideal methodology is one that produces the most sensitive analysis
with the least amount of noise. After a good deal of research and testing, we developed an expert system that constantly
modifies the half-life to best achieve this goal. Also in this issue: The Beta Factor (foreign closed-end funds
traded on another country's exchange), ADR's, and More on Closed-End Funds.
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- Since the introduction of StyleADVISOR in 1992, several firms have developed and are marketing
style and performance analysis programs of varying sophistication. Their promotions usually include terms such as "revolutionary
new technique" or "second generation", etc. Recently, there has been a lot of discussion about
exponential weighting and "centered windows". Of course, if there is a better way of doing style analysis,
we want to know about it. We decided to do our own study to determine if either of these methodologies were an
improvement. The results of this study are contained in this newsletter. Also in this issue: International Exposure:
Going Multi-National.
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- Plan Sponsors and consultants hate surprises from money managers. You usually only hear about surprises when they create
unsuccessful results. A lot of surprises could be avoided. They are usually the result of selecting the wrong benchmark
for a manager or not fully understanding a particular manager's risk or style. A very large surprise may occur
sometime in the next few years when the Japanese stock market begins to do well relative to Europe and Asia X
Japan. Also in this issue: New international manager universes and new performance statistics added to StyleADVISOR.
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- Where have recently been a number of articles on a new risk-adjusted performance measurement developed by Lea Modigliani of
Morgan Stanley. This method risk adjusts a manager's returns based on their relative risk to a given benchmark. I believe
this might be a hard sell. Try to tell a manager that a 20% return was really only 15% because his monthly returns
varied more than the manager's benchmark. Better yet, try to explain to an investor that a 15% return was really
20% because there was less variability. A more palatable alternative may be to simply risk adjust the benchmark.
This can be done quite easily within StyleADVISOR. Also in this issue: More on style indexes, new sector
indexes, and tricks using AllocationADVISOR & StyleADVISOR.
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- Kudos to Morningstar for adopting their new style categories. How are they created, and how do the results compare to
analyses done using the Russell four corners? Also in this issue: Style mapping, graphics enhancements, and
research contest winners.
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- StyleADVISOR's Fund feature allows users to combine separate return series to create weighted composites of indexes, funds, or managers.
Learn how to create policy benchmarks, funds of funds, examine your total portfolio, and create endless "what
if" scenarios using this powerful feature. Also in this issue: New Variable Annuity database, Hedge Fund Indices, and Tips & Tricks.
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- The standard analysis that StyleADVISOR does is a constrained quadratic equation - all coefficients
must equal one. However, there are options within the program that allow you to short one or all of the indices.
The results can be very interesting. Also in this issue: More on the Annualized ExRet/Std Deviation Graph.
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- The Beecher After-Tax Universe is a fairly representative slice of the large mutual fund universe and includes two
composites (both before and after tax). We believe that the resulting peer group and performance analyses are
both valuable and interesting. Also in this issue: The new Zephyr Style Universes.
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- Get the scoop on the new Upside/Downside Market Capture analysis and other enhancements introduced in version 4.2.
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- Those of you who have been working with style analysis for some time may have noticed that small growth managers seem
to have a much higher propensity to beat their style benchmark. This report takes a closer look at these observations
and offers some explanation.
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- StyleADVISOR to build a completeness fund to offset your style biases and decrease the tracking error to your policy benchmark.
Introducing the StyleADVISOR Database Creator - create your own customized database within StyleADVISOR. Import hundreds or even thousands of returns in minutes
with our Excel add-in.
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- A new International Benchmark. The EAFE index's heavy weighting in Japan (approximately 45%) makes it less than appropriate
for the majority of internationally diversified managers. Zephyr Associates has created a new international benchmark
that is country weighted, not cap weighted. You will find it in your Index Database Supplied With StyleADVISOR.
This benchmark has a significantly higher R2 to most international managers than the EAFE.
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- We have recently added a new graph which measures annual excess return over the style benchmark on the vertical
axis and standard deviation of excess return on the horizontal axis. This measure of a manager's skill can be most revealing
when comparing multiple managers. We show a number of examples in this newsletter.
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- Here we talk about some of the new enhancements to StyleADVISOR, such as being able to use your customized style benchmark
as the benchmark in your risk/return analysis with just a point and click.
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- StyleADVISOR users now have the ability to create a different kind of universe called a POD, or Portfolio Opportunity Distribution.
This is an innovation developed by Ron Surz. Instead of using the actual returns of a group of managers, POD's
calculate the return series for a group of portfolios of randomly selected securities.
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- Plan sponsors are responsible for the "style bets" that they take away from their market benchmark. StyleADVISOR
shows you what those bets are and will allow you to find the optimum weights for each manager to most closely track
a benchmark.
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- One of the many derivative casualties occurring in the last few years was the Piper Jaffray Institutional Government
Fund. I wondered if StyleADVISOR could have provided a clue as to the riskiness of this
fund during the 1993-94 period. I found the answer to be a resounding YES. Find out how StyleADVISOR
can detect leverage in a mutual fund, without ever looking at the portfolio holdings.
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- I know that I don't have to convince our StyleADVISOR users that style analysis works because they have seen
the results first hand. For those of you who would like to demonstrate the validity of this approach to others,
the detailed results of some of the many studies we have done on this subject can be found in this newsletter.
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- StyleADVISOR clients receive international style indexes on 26 countries and 8 regions. Performing a style analysis on any one
country or region is as simple as a domestic equity analysis. However, it is not quite as easy for international managers
who diversify among many countries and regions. This article suggests several approaches.
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- We provide a number of domestic equity style indices for our StyleADVISOR users (Wilshire, Prudential, S&P BARRA, Russell).
Because of the different ways in which these indices are constructed, they will give different results in your
style analyses. Find out which are the best.
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- For over twenty years, plan sponsors, money managers, and consultants have used the "Floating Bar Graph"
to display how a manager has done vis-a-vis a universe. We have developed a new Manager versus Universe graph
which literally provides 100 times the information as the obsolete bar graph. For a hard copy of this newsletter
call (800) StyleAD (789-5323).
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- Most plan sponsors have adopted an asset allocation policy for their total fund. With StyleADVISOR,
you can create a policy benchmark for your asset allocation and also find the optimal mix of managers in order to
closely track that benchmark.
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